The Rockefellers Offload Oil and Take On Clean Energy

By

Robert Milburn

April 11, 2015

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By

Robert Milburn

April 11, 2015

The Rockefeller Brothers Fund—the $866 million-asset foundation started in 1940 by John D. Rockefeller Jr.’s five sons—announced in September that the family would divest itself of all their coal, tar-sands, and fossil-fuel investments held in the fund’s endowment. The eight Rockefeller family trustees and nine outside board members decided the fund needed “to better align its endowed assets with its mission” of combating climate change.

The irony of Standard Oil’s heirs shedding fossil fuels wasn’t lost on the media. “Rockefeller Brothers Fund forsakes its legacy,” screeched the tabloid headline of normally polite NPR. The fund holds less than 5% of its portfolio in fossil fuels, down from 7% when it began divesting in 2014, and it has reduced its coal and tar-sands assets to just 0.8% of the overall endowment. RBF hopes its endowment will be fossil-fuel free in the next three years.

SEVEN MONTHS AFTER THE ANNOUNCEMENT,Penta circled back with a pointed question: Where are the Rockefeller heirs reinvesting their former “dirty” money? The answer: clean technologies like solar and wind energy. Some readers might roll their eyes, but we’re giving them a pass. The Rockefeller family foundation is shrewdly leveraging its asset base, not just its grants, to have more impact in the family’s chosen field of battling climate change. “If we’re only using the 5% we’re required to pay out each year in grants,” reasons Stephen Heintz, president of RBF, “we’re underutilizing our assets.”

Clean-energy investments will eventually make up as much as 10% of the fund’s overall endowment. But earning healthy returns from a portfolio is rather important, too. Will their squeaky-clean investments fare better than fossil fuels? It’s too soon to tell, concedes 35 year-old Justin Rockefeller, RBF trustee and son of John D. the fourth. “But it’s obviously helped us that the price of oil dropped,” he says, before dryly adding that there are “some conspiracy theories out there.”

Justin argues that his family’s controversial move away from its historic ties to the fossil-fuel industry is a plus for the foundation’s environmental mission—just “another tool in our tool belt to help have an impact on the world.”

He has a point. The Rockefeller name endorsing the sustainable-energy industry was symbolic enough to generate worldwide buzz, and after the divestment announcement was made, a São Paulo, Brazil-based fund manager that invests in Latin American infrastructure projects contacted RBF about investing in one of its funds. “We liked the vast majority of what they were doing, but there were some traditional energy investments that contradicted our philosophy,” Heintz says. The fund manager created a separate share class for RBF, at its own expense, that stripped out the fund’s offshore-drilling investments, leaving just clean-tech companies, like dams generating hydroelectric power. RBF has decided to invest $15 million.

BUT THE ROCKEFELLERS’ entry into the clean-energy business hasn’t exactly produced a series of gushers. “We’re finding that the process of divesting is actually the easier part of the equation,” Heintz concedes. The foundation has invested in just two environmental-impact funds since the announcement: $15 million to Turner Impact Capital, which invests in affordable “green” housing, and a $15 million commitment to Al Gore’s Generation Climate Solutions fund.

“We’re not embarking on this to make a splash, compromise returns, or increase volatility, so it’s been challenging,” says Rockefeller.

The problem? Many deals they’re seeing are direct venture-capital-type investments that RBF doesn’t have the time or expertise to vet. So the fund is talking to other environment-focused foundations about pooling “tens of millions of dollars” and approaching a venture-capital firm to build a portfolio on the consortium’s behalf. “That way we have enough aggregate capital to get in on the more interesting deals, and we can afford the fees,” Heintz says.

Interested to learn more? Readers can track RBF’s progress on another Justin Rockefeller-spearheaded endeavor called The ImPact. The members-only site will be launched later this year, he says, and will be a platform for his family foundation and other like-minded institutions to share their impact-investing results through “transaction-level data.”

Now that’s a smart move, for a growing industry long on hype and short on facts, and we hope Penta will be invited back to study the family’s impact-investing results, once the data start rolling in.

An earlier version of this story omitted that the nine outside board members of the Rockefeller Brothers Fund also approved the exit from fossil fuels.

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